Mumbai ITAT Rules in Favor of Colombia Co-operative Housing Society, Dismissing Rs. 2.28 Crore Capital Gains Tax Demand
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Mumbai Bench "C" has quashed the reassessment order against Colombia Co-operative Housing Society Limited. The Tribunal concluded that the reassessment was invalid and the Rs. 2.28 crore received by members from a developer was not taxable as capital gains under the Income Tax Act, 1961.
The case revolved around the taxability of receipts under Transfer of Development Rights (TDR) and Floor Space Index (FSI) granted to Colombia Co-operative Housing Society by Kamala Landmark Construction Private Limited. The society, representing its 40 members, had entered into a development agreement in 2002, which was supplemented in 2014 following amendments to the Development Control Rules, 1991.
The ITAT, comprising Judicial Member Shri Sandeep Gosain and Accountant Member Shri Girish Agrawal, underscored that the FSI rights had no cost of acquisition, making Section 55 inapplicable. The Tribunal cited precedents from the Bombay High Court, which held similar receipts as non-taxable for the society but taxable in the hands of individual members.
The Tribunal further addressed the reopening and reassessment under Sections 147 to 151A, ruling them invalid due to procedural lapses and incorrect facts. It was noted that the Rs. 2.28 crore was paid directly to the society's members, not the society itself, thus negating the capital gains tax liability on the society. Additionally, the ITAT directed the Jurisdictional Assessing Officer to verify the society's claim for deduction under Section 80P concerning interest income from co-operative banks.
This ruling is a notable affirmation of the tax treatment of co-operative societies and their members, particularly regarding the legal status and tax liabilities under the Income Tax Act.
Bottom Line:
Taxability of receipt under TDR (Transfer of Development Rights) and FSI (Floor Space Index), jurisdictional issues, deduction under Section 80P, and assessment of legal status of Co-operative Housing Society under Income Tax Act.
Statutory provision(s): Sections 147, 148, 149, 151A, 144B, 45, 55, 80P of the Income Tax Act, 1961
